Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
As the automotive industry transitions to electric vehicles, companies developing lithium-ion battery technology will be in the driver’s seat – and they’ll be carrying Chinese driver’s licenses. Li-ion technology is quickly replacing nickel-metal hydride batteries in hybrid electric vehicles, and the advanced battery market for emerging plug-in hybrid vehicles will be worth billions of dollars within a decade, according to a new report by market research firm GBI Research. But while Japanese manufacturers currently control a majority of the global advanced battery market, South Korean and especially Chinese firms are nipping at their heels.
If you own a hybrid-electric vehicle today, chances are it has nickel-metal hydride battery technology. These batteries today account for 97 percent of the hybrid electric vehicle market, by revenue. But the nickel-metal hydride technology has reached its maturity, according to GBI researchers, and Li-ion technology is advancing more quickly and offers better overall performance characteristics, such as longer life, high energy density, and is more light weight. The report estimates that hybrid electric vehicles will make up 10 percent of new sales by 2020 and that Li-ion batteries will be in more than 60 percent of those cars and trucks.
But plug-in hybrid electric vehicles could be an even bigger opportunity for advanced battery makers. The report’s authors believe the automotive industry will evolve from hybrid electric to plug-in hybrid electric vehicles “in the near future” and that the pace of the transition will be much faster than expected. This shift will provide a “huge sales growth” opportunity for advanced batteries, Li-ion batteries in particular, according to GBI researchers. The report estimates that global plug-in vehicles sales will reach 1 percent of the light-duty vehicle market by 2015 and 5.3 percent by 2020. That could translate into a global plug-in vehicle battery market of $17.3 billion by 2020.
So the market for advanced batteries is clearly large, but which countries will likely lead the development of the technology? Advanced battery manufacturing currently is dominated by China, Japan and South Korea, together accounting for 98 percent of the market in 2009. While Japan’s share of the market will remain significant in the near term, GBI researchers say that the country’s dominance is “fading away.” Japanese manufactures controlled 55 percent of global advanced battery production last year, down from 78 percent in 2002. Meanwhile, China’s share rose to 25 percent in 2009 from 11 percent in 2002, and South Korea’s reached 18 percent last year from just 6 percent in 2002 (See chart below).
GBI researchers seem most impressed with China’s advantages in the market: attractive government incentives and cheap labor, which has allowed manufacturers there to replace a conventionally capital-intensive business using automated production lines with a labor-intensive one that relies on people-power in its production lines. Aware of these advantages, Japanese and Western companies are fast entering into partnerships with Chinese battery manufactures.
Warren Buffet, for example, has invested $230 million into BYD Company, a Shenzhen-based battery and electric car maker that has said it will sell electric cars in the U.S. starting in 2011. To date, however, BYD’s sales of its F3DM plug-in hybrid model have been weak. But according to previous reports, hybrid cars will be truly mass-market in China by 2011 or 2012, and the country’s fleet will begin a minimum 10-year transition to plug-in hybrids and battery-electric vehicles as early as this year.
Related GigaOM Pro Research:
Chart courtesy of GBI Research.